Unless you’ve been living under a rock for the past decade, you’ve probably heard about cryptocurrencies.
Over the past 2 years, cryptocurrency prices have begun skyrocketing in response to the huge global uncertainty.
Changing the way we think about money
Whether you believe in cryptocurrencies or not, it’s clear that digital assets are here to stay. One of the reasons why cryptos have taken off can be attributed to their decentralized nature.
Cryptos are completely free of government control i.e. their circulation is not controlled by any one government or monetary authority.
Fun fact here: cryptocurrencies are 100% digital and do not exist in the physical form.
This allows cryptocurrencies to circumvent the bank sector. Something that has been made possible thanks to the blockchain – a digital ledger that records transactions and changes in ownership.
Because of this, pseudo anonymous transactions can be made using cryptocurrencies. And this naturally has led to severe government consternation.
Bitcoin (BTC) in particular has been on the tip of everyone’s tongue. It’s been called “digital gold” and is the cryptocurrency that most beginners would be familiar with.
Originally developed by the elusive Satoshi Nakamoto in 2009, Bitcoin was previously used as a medium of exchange on the deep web.
However, since the downfall of the Silk Road, there has been increased government oversight on the usage of cryptocurrencies. Because of this, Bitcoin and other cryptos are predominantly used as an investment rather than an actual currency for exchange.
Investing in cryptocurrencies
If you’re looking to get aboard the crypto train, be aware that cryptocurrencies are extremely unpredictable.
As the industry is entirely deregulated and decentralized, cryptocurrencies have developed a reputation for being extremely volatile. Prices have been known to fluctuate wildly with little-to-no warning. Because of this, you’ll often be at the mercy of market forces for better or worse.
While there have been tales of millionaires being minted overnight, investing in cryptocurrency is regarded as being akin to gambling. You can just as easily lose millions in an afternoon’s trading if you aren’t careful.
So as a rule of thumb when investing in crypto, only spend what you’ll be comfortable losing. Or else you may find yourself with basically nothing.
Keep yourself updated with the latest government regulations if you want to stay on top. While cryptos are unregulated, they are still vulnerable to government intervention.
If you’re looking to get your hands on some cryptocurrencies, you’ll first have to own a crypto wallet. These wallets come in two variants: hot and cold. Learn more about the differences here.
Technically speaking, a crypto wallet does not hold actual cryptocurrencies – rather it stores the keys needed to access said cryptos.
However for simplicity’s sake, we’ll continue with the assumption that cryptos are stored in digital wallets.
Hot wallets provide owners with quick and easy access to their cryptocurrencies. These are basically online-only services that store your cryptocurrencies for you. Most also provide facilities for the easy transfer of cryptos from one user to another.
Cold wallets on the other hand are the safe deposit boxes of crypto. They usually come in the form of portable hard drives or pen drives. But there have been instances of people making use of actual pieces of paper to record their crypto codes.
Both have their fair share of pros and cons. But most crypto enthusiasts recommend storing a small amount of crypto in a hot wallet for immediate use and the balance in cold wallets to keep it safe.
The world of cryptocurrencies is more than a little unforgiving to amateurs. But with the right research and some care, it’s a perfectly safe proposition.